Interest Builds In Wards Building

March 29, 2001|By Susan Chandler, Tribune staff reporter.

The stores are closed. The real estate is sold. The employees are gone, except for a few at headquarters who will depart in the next few days. There isn't much left of the empire that Montgomery Ward & Co. built.

But there is one piece outstanding: Who will end up owning Wards' striking 26-story headquarters tower at 535 W. Chicago Ave. near the Cabrini-Green housing complex?

That question may be resolved soon.

Already, four parties have expressed written interest in the property, according to Tony Smaniotto, the CB Richard Ellis broker recently hired to market the tower and the parking garage across the street. He was retained by Kimco Realty Corp., a New Hyde Park, N.Y.-based real estate firm, that paid $60.5 million for the rights to market Wards' real estate.

"The goal is to expedite this very quickly," Smaniotto said. "With the interest we have, we think we can complete an `as is' sale by the middle of the second quarter."

He also expects to get something close to the asking price of $40 million, which would translate into about $75 per square foot, a premium price for office space that isn't in a central business district. "We feel good about our pricing expectations," he said.

The building could be sold to an investor who will then find office tenants to fill the space, or it could be sold to a company that wants to occupy a chunk of the space itself.

Did someone say Boeing Co.? The Seattle-based aerospace company recently announced it has launched a search for a new corporate headquarters in one of three cities, including Chicago.

But the hottest interest is expected to be expressed by "converters," those developers who take industrial or office space and convert it to residential use.

That interest only confirms what Chicago developers have known for some time: There's big money to be made in urban residential conversions because of the huge demand by young professionals and empty nesters who want to be close to cultural events and shopping.

"There's a residential boom going on," Smaniotto said. "My palette is going to be multicolored. We might end up with five or six bids from converters."

The Wards building presents special problems for converters, however. Its windows are fixed in place, which violates the city's building code for residential use. Also, it would be costly to hang balconies from the building, an amenity that has become almost a requirement for loft buyers in recent years.

Balconies also would be an ugly feature on such a sleek-lined modern skyscraper, architectural preservationists warn. The City's Department of Planning and Development agrees.

Even though city planners worked out a compromise that allowed some balconies to be hung from another former Wards building, they are firmly opposed to hanging appendages on the tower.

"We're usually flexible in a lot of areas, but we won't be on the balconies," said Becky Carroll, spokeswoman for the planning department. The Wards tower, which is not a landmark, was built in 1974 by architect Minoru Yamasaki, who also designed the twin towers of New York's World Trade Center.

Still, there are some distinct advantages for residential converters. The Wards tower has no interior walls, minimizing the amount of demolition work involved. It also has unobscured views of the city and lake on both sides. "I put that view up against any in the city," Smaniotto said. "You can see out to the horizon. It's spectacular."

One bidder that is eager to do a deal is Centrum Properties, the developer that owns much of the surrounding Wards property. Centrum already has drawn up preliminary plans for the tower that envision it being converted to residential lofts without balconies.

"Without question there is a discount for not having outdoor space in every unit, but you can sell them," said Steve Lipe, a Centrum partner. "With balconies, it would be the ugliest building on earth."

Centrum believes it should have first dibs on the tower, given its huge investment in the area. But $40 million sounds steep to Lipe. "We know the challenges that other buyers may not know. I would be very surprised if it went that high."

Centrum already has developed the south end of the former Wards catalog warehouse at 600 W. Chicago Ave. into a commercial project known as the E-Port Building. At the north end of the building, it is in the process of developing almost 300 loft-style condos, ranging from about $200,000 to $1 million for top-floor units. The residences will be for sale by late April, with the first move-ins expected early next year.

Nearby, Enterprise Cos., which bought a portion of the surrounding property from Centrum, is beginning to market 241 loft-style condos in Wards' former merchandise building on the south side of Chicago Avenue. Those units will be priced from $165,000 to $850,00.

Enterprise Chief Executive Ronald Shipka says he would defer to Centrum before bidding on the tower. "They've been very good to us, and I would respect that. We've bought several properties from them."